Senate Plan Raises FDIC Limits, Extends Tax Breaks

The Senate on Wednesday voted in favor of the same $700 billion financial rescue legislation that failed in the House by a stunning 228-205 vote on Monday, with one significant change.

The bill now includes a provision temporarily increasing to $250,000 from $100,000 the amount of funds in personal savings accounts, certificates of deposit and other bank deposits that are guaranteed by the Federal Deposit Insurance Corp. The increase would be in effect until Dec. 31, 2009.

Currently, a married couple is insured for $100,000 in an individual account and an additional $200,000 in a joint account, for a total of $300,000 in insured deposits. The legislation would allow each spouse to be insured for up to $250,000 in an individual account and $500,000 in a joint account, for a total of $1 million.

The measure was attached to a package of popular tax breaks that were already moving through Congress on a separate track and which would cost about $110 billion from 2009 to 2018. The so-called tax-extenders measure includes provisions designed to blunt the impact of the Alternative Minimum Tax, a parallel tax system that eliminates many popular deductions and credits. The AMT was originally targeted at the very rich but has hit upper-middle-class and some middle-class taxpayers.

The tax bill further extends popular tax breaks for wind, solar and other renewable energy and would create a program requiring insurers to offer mental health benefits on par with medical-surgical services. The so-called mental health parity provisions, which have long been a cause of Sen. Pete Domenici, R-N.M., have broad support in Congress.

Among the Senate plan’s provisions:

*Increases personal tax exemptions under the AMT and shields employee incentive stock options from the AMT.

*Extends a tax break that lets homeowners who don’t itemize deduct up to $500 in property taxes a year, or $1,000 if they’re married and file jointly.

*Extends a popular tax deduction for higher-education expenses and a $250 deduction for teachers who use their own money to buy school supplies.